Research question: accurate measure of the risk aversion of farmers.

• pesticides -> lower variance of returns from farming

• pesticides applied before pests arrive

• if farming is a lottery, pesticides reduce its volatility

• the higher the risk aversion, the higher the pesticide use

with a precise risk aversion measure…

1. estimation of subjective costs to farmers of cutting or eliminating pesticides;
2. amount of pesticides that could be cut by imposing the risk-neutral pesticide use.

State of the art in risk literature is bad

• low external validity
• low correlation with questionnaires
• low correlation with field behavior

develop new risk elicitation measure

• takes into account noise & cognitive abilities

• takes into account risk perception

• possibly look for other theories than EU

• theory and lab experiments in progress (ANR RETRISK)

• FAST: application to the field and farmers

• economists assume subjects share the same risk definition

• namely:

  • risk as a distribution of probability over outcomes
  • \(EV\) as the average across all possible states of the world
  • risk aversion as diminishing marginal utility of money
  • subjects care about variance

• but subjects think of risk as probability of a loss

• do subjects find our tasks risky?

• We do not know because we assume they do

• Spiliopoulos & Hertwig: different decision rules for different contexts
• Schneider and Sutter: higher moments matter
• Sunder et al: curvature of utility function not a valid theory
• Ergodicity economics (Peters et al): drop EV, use time-means
• …

implement, test and propose a behavioral policy with an endogenously reducing target

• e.g.: target is median pesticide use (t-1) - 10%

• bans or fixed thresholds can induce rigidities
• market fails (externalities)

what about endogenous moving targets? - leverage the impact of social norms for policy compliance & success - endogenous targets could be more effective than exogenous - used in the real world: Italian qualif’, pay-what-you-want platforms

A lot. We don’t know much about

• heterogeneity of costs and externalities
• adjustment cost
• collusion-proof mechanisms

1. extend the theory supporting this tool,(heterogeneity, adjustment costs, calbration);
2. test the mechanism in lab experiments, especially its sensitivity to parameters, heterogeneity, adjustment cost;
3. test it in the field with actual farmers, and run calibration analysis for the parameters.